Category Archives: OBR

Osborne: The Door Tax


The rumour circulating the corridors of Westminster is that our George is to introduce a door tax in next weeks Budget. A door tax! I hear you exposulate.What the hell is that? Hold on. I’ll explain A great deal of thought has gone into this. I’ll elucidate.
It’s no good just increasing taxes on a few regulars. It is subject to diminishing returns (See ch.2, Bentham The Principles of Economics). We need something that is new, easily levied and fair to rich and poor alike. By door I mean door space – every room has to have one. I know you smart Alec’s will take a screwdriver and remove the doors but you can’t fill up the spaces and get in and out of the room. Caught you there. We don’t need to be precise. There would be a scale according to the number of romms. Lets take the usual sort of 3 bedroomed house. We would assume 8 door spaces, a two bedroomed property 5 spaces and so on. Now here’s the egalitarian bit. How many doors does a mansion have? Well a small one might have 15-20, a large one, well goodness knows. Let the devil take the hindpost. Get the idea. Let’s assume £10 permonth for a small property and £40 for a large one: that is the tax wil range between £60 a year and £500 a year with the rich paying more. Get it? The number of homes is some 35 million (Well you try to do better.) This we can say is an informed guess. The type of forecast you would expect from the Treasury -let alone the OBR, giggle, giggle. This revolutionary new tax would raise £1,800 million a year. Good bye crisis. Move to one side, David, I’m coming in. The Treasury watchwords under my guidance are create, invent and pioneer. We Osborne’s didn’t get where we did in life by the wailing and nashing of teeth. At least not our teeth!

Advertisements

Leave a comment

Filed under BBC, Coalition Government, Conservative Home, Economics, George Osborne, Guardian, Labour Blogs, Lib Dem blogs, Liberal Voice, OBR, Treasury

The Economy Stupid


Elections are won on economics: its the economy stupid. Our numbers are bad but they will become worse. If the Eurozone collapsess they will be disastrous. But party alleigances are static. Hello, out there is any one listening. The reasons for static polls are well-known: mcu blame is attached to Labour’s inheritance of deby and the, seconly, the electorate are dogmatically fair-minded – they give credit for trying. The Coalition is trying – but in more than one meaning of the word. So it is a long and hard road for Labour toi convince the electorate that they could do better. 

What will change things are events. Anyone looking back in 2011 knows how difficult it is to predict them. If they are external events there is a breathless pause while the country rallies round. What woul be the public reaction to a forced opening of the Straits of Hormouz if petrol prices doubled. How would the public react to yet another war? Would it really come to that? It might. Would things look bad for the Coalition if unemployment topped three million. Mrs Thatcher recovered from that but then she needed a successful invasion of the Falklands.

Sometimes Government’s implode. What would make the Coalition implode.  European policy might if Cameron was foolhardy. Surely he won’t be tempted but you never know. Perhaps not. The Coalition might split. Not much chance of that. It is in the Lib Dem interest to soldier on rather than than be decimated by the electorate. 

Once I would have been bold and would make a prediction. Should we settle for a quiet life with more of what we have got. I hope not. Perhaps if I predict it we shall get something more exhilarating. OK nothing will happen in 2012.

Leave a comment

Filed under BBC, Cabinet, Cameron, Coalition Government, Deficit, Economics, Ed Balls, Europe, George Osborne, IFS, Labour Blogs, Labour Goverment, Lib Dems, Nick Clegg, OBR, Politics, Treasury, Unemployment

: Public Borrowing: Nearer and nearer draws the time


The constant ctiticism of the Government’s budget deficit figures is that the cuts are too great and too fast. The effect, or merely the impression, that this is so affects consumers, output and employment. The prognosis of the Coalition is that such a policy will lead to a stagnant low-growth economy and the deficit would not come down very much, if at all.

It is disappointing to the critics that so little publicity was given to public borrowing in the first two months of this financial year which shows just that: borrowing in the first two months of  2011/12 is up from £25.9 billion to £27.4 billion – up not down! 

Of course one swallow – or is it two- does not a summer make. Or does it? Well, this argument should be settl;ed in July when we have three months figures for GNP, empliyment and public borrowing. It will be a relief to pass from conjecture to fact. There are enough straws in the wind to suggest that growth will be either exceedingly modest or none at all. If then public sector borrowing has not fallen when compared with last year, the Coalition target of eliminating the deficit in four years will be lost.

Politicians will busily spin. It will be argued that there are special factors: currency uncertainty in Europe, a stalling US economy and slow downs in the BRIC countries who are expected to fuel a global economy. All very true and plausible. However, these pleas should go on deaf ears. There are always special factors and Governments are supposed to make allowance for them. The game will be up – and it should be called.

The absence of what is called a Plan B, or Plan C for that matter, places the Coalition with a conundrum. What is to be done? – as Lenin would utter. Is such a dilemma not worth a vote of no- confidence. I can hear the objections. There is no prospect of unseating the Government  and you look silly and weak if you move these motions without a chance of a majority. Is not this what the leadership of the Labour Party is really about? The baring of breasts and the gnashing of teeth which passes for Opposition now does not meet the challenge of the times. What about a reasoned motion putting forward a number of believable proposals for kick starting the economy followed by a no confidence motion? Anything less than this will fail. Those who urge an alternative economic policy should have the courage to enunciate it now. Well in July, actually. Any sign of heads being knocked together or is it time for hols? Time enough said slow.

Leave a comment

Filed under BBC, Cabinet, Cameron, Coalition Government, Conservative Home, Deficit, George Osborne, House of Commons, Labour Blogs, Labour Goverment, Lib Dem blogs, Nick Clegg, OBR, Treasury

Can the Coalition Govern?


According to the well-repected bog Conservative Home, the Government is in a state of confusion. Cameron is determined to push through a major reform programmed fueled by Conservative ideology; small government, tax cuts (eventually);  constitutional reform (reluctantly), educational reform (expensively), benefit reform (work if you can or else);  self-help (Queen Victoria’s self help maunual has been lost), and neo-colonial glory (no one has told Assad and Ghadaffi).  What is very clear, as the Archbishop of Canterbury has enunciated, no one voted for Coalition policiues. In the jargon there is no electoral mandate. For the moment the government is cemented together by the fear of  electoral  wrath: it is better to be hung together than singly.

Every shrewd observor knows that these issues taken separately will not sink the Coalition. The only issue that will do that is the state of the economy. We must wait for July for the GDP figures for the second quarter. If these are bad the game may be up. What would be bad? Zero growth would be bad because it would signal that there has been no growth for the nine months in which the effect of the Coalition’s economic policies has been experienced. Slightly higher growth with a projection for the year as a whole of 1 percent to end 31 March, 2012 would be bad because the public sector deficit would be at unacceptable levels. If either of these economic prognostications becomes true there the very real consequential result that the Governmen’t legislative programme would have ground to a halt and the Coalition itself in its present form will collapse.

It may be that it is not only Arab countries and Greece that will have become ungovernable. I sense a gathering storm. Populations in many countries will arrive at the conclusion that politicians are not to be trusted and our political systems may colla[se. If citizens do not trust the system to safeguard ther basic  interests they will seek people-power alternatives: they are already doing so in Libya and Syria. There is something intoxicating about nightly tv screens full of demonstrasing crowds with banners and music. Why not us and why not now?

I suspect that our own governemnt is frightened. If the streets fill up with pensioners and trade unionists, if it goes on through the summer, if one policy initiative after another grounds to a halt, what is there to do? What is certain is that the disease of protest and rejection of authority knows no country boundaries. I have made fun of the Big Society but I do recognise that it has some virtues. If you can state, and if it is true, that we are responsible now and not the government, might the dilemma of electoral madate be solved. The Coalition could say, ‘You (we) are the masters now. Don’t blame us blame  yourself (or is it me that needs saving)?

1 Comment

Filed under BBC, Cabinet, Cameron, Coalition Government, Colonialism, Conservative Home, Deficit, Economics, Ed Balls, Europe, Greece, House of Lords, Labour Blogs, Lib Dem blogs, Liberal Voice, Libya, Middle East, OBR, Politics, Spending Review, Syria, Universal benefits, Yemen

Blair: We need a better Middle Eastern Plan


Blair tells us, that is the British public,  that we need a better plan for North Africa and the Middle East. What does he mean? If he means what I think he means a better plan is the last thing Britain needs. A little clarification will help. Who are ‘WE’. It appears that NATO, the European Union and the USA are ‘WE’. or to be brief the Western World. And what do we need a plan for? What is it to do for us? The purpose of the Plan is to assist Arab states become more like us. Particularly those who possess oil and mineral resources but to be fair all states within that geographic area. In our view all democracies will repect universal rights fair representation, equality and freedom under the law and all of them wish to attract more investment, grow and attract investment and develop commerce  to and from the West. What should we do? We should intervene to help these changes take place and use diplomatic and financial means and armed force to help bring these changes about.

President Obama approves these objectives but despairs of a lack of willingness of NATO countries to pay the price for the extra spending on defence such a policy requires – including both France and the United Kingdom. There is, apparently, no political will. Friends Cameron and Hague have the will but not the money and each day that passes limits our armed capabilty. Imagine a conversation at the Foreign Office.

Secretary of State can we have you direction, please. Here is a list of countries we are determined to assist to democratic status. They all require a UN resolution. What do we do? What do we do, you say. We act, this Goverment acts. Give me the Calendar. Not that one, 2011 you ass. Let’s see. We  need to allow a week between resolutions. Let’s do it aphabeticallyby week. 1.Bahrein  2. Gulf states(?) (need to be more precise here) Israel/Palestine (a tall order this) 3. Lebanon (good thinking), 4. Saudi Arabia, (you’re joking(? ) , 5. Syria (a brutal race, we need armed force here, get the Turkish  Premier on the phone. What’s that!  A deal on Cyprus needed? Have we not  done one of those?  Get Greece on skype. 6. Yemen ? (Good God 500,000 men could get lost in the desert. I exagerate. But you know what I mean.) What does Obama think? More defence expenditure and quickly. Something about lendlease,  if it would be helpful. So we have reached a decision point. I’m strong on decisions you know.  Look I can’t think clearly now. Get Liam in the office on Monday. Hold on. Here is one of my inspired thoughts. National Service! Get the unemployed youth off the streets, lower the unemployment rates at a stroke, re-issue some of those Lee Enfield’s  -and off we go. Hey, ho the boys. Let Liam know ahead of the meeting, there’s a good chap.

Leave a comment

Filed under Arab League, Bahrein, BBC, Cabinet, Cameron, Coalition Government, Colonialism, Economics, Ed Balls, France, George Osborne, Ghadaffi, Gulf States, Israel, Italy, Labour Blogs, Liam Fox, Lib Dem blogs, Liberal Voice, Libya, Middle East, National Service, NATO, Nick Clegg, Obama, OBR, Politics, Sarkozy, Syria, Turkey, Wlliam Hague, Yemen

Riding the IMF Horse


There used to be a day when the British economy was not run to please bankers or technocrats in international bodies. Alas, they are passed. However, it is worth asking when you read a forecast, in whose interest is it published? The IMF believes that it is important for its members to reduce public indebtedness and makes it a public objective regardless of the beggering of any nation’s citizens until this goal of public policy is realised. Naturally it is supportive of the budget deficit programme of the Coalition. The IMF  addressed  the issue of a Plan B. You will be pleased to know that if growth remains low the IMF would support monetary easing, keeping interest rates low and putting a brake on cuts (without anyone noticing it). In this way the deficit would not come down quickly in the first two years but would come down faster in subsequent years.

This revelation of the existence of Plan B is hopeful but not reassuring. If growth is slow, the main body of public expenditure cuts is realised , and assuming all other parameters are stable (other than unemployment) the deficit will not come down. The credibilty of the Government in the markets, which Boy George goes on about, will be lost. If then the Government persists it will be confronted with a mountain to climb in years 3 and 4 when credibility is lost and the deficit stubbornly high. If then Georgie  presses on growth will remain low throughout the five years, So what then Grannie do we do next?

Well, dear, says Grannie, it might not be as bad as that. That’s what they all say, says I. What is the use of saying that when the flood waters have reached the bedroom sill? Shouldn’t we have been alerted before this time to leave the house? Hindsight,  says Grannie, it is an easy art.

There are other dangers. The IMF talks bravely about global growth rates remaining high,  surviving high commodity prices and resuming stable growth and low inflation. But then he would, wouldn’t he? But  we know that all recessions and recoveries are unique. Perhaps this depression will last for ten years or more. And what shall we do then Granny, says I. Don’t worry dear, says she, I’ve put a little money aside to cope with the odd crisis. Well Granny, that’s the problem. We have been using it. Using it? No one told me that. The problem Grannie is that debts continue to rise. Good gracious, what did you say about the bedroom sill. Take me there. There’s time to jump. A splash is heard, off stage. Granny, you can’t swim! These words came too late. Poor Granny, poor me -oh, and by the way, poor you.

Leave a comment

Filed under BBC, Budget 2011, Cabinet, Cameron, Coalition Government, David Smith, Deficit, Economics, Ed Balls, George Osborne, IFS, IMF, Lib Dem blogs, Liberal Voice, New Stateman, OBR, Politics, Rising prices, Treasury

The Economy: Now We Know


The GDP figures for Qtr.1 2o11 tell us what we need to know on the vexed and central economic and political dilemma of how to cut the public deficit and grow our way to economic success. No economic growth for six months is bad news. I have commented in previous posts on the optimism of OBR forecasts and that they are consistently behind the curve – and wrong. They were wrong in their belief that the last quarter 2010 figures would be adjusted upwards and that this current quarter would come in at 0.8 percent growth, They are surely wrong in their forecast for 2011.

Does it matter? Yes, it does.  Lower growth means higher unemployment and public debt and  lowers confidence.  If the Coalition intention remains ‘fixed as the Northern star’ another round of expenditure cuts, higher taxes and a spiral downward to economic defeat and long term recession is on the cards.

To echo Lenin, what do we do now? Something revolutionary? To enter into the spirit of things, bring the Coalition to a halt. In eight days time throughout Britain the electorate have an opportunity to inflict  a mortal wound by voting against the Coalition parties, and then there is the time honoured tradition of a motion of no confidence in the Commons (Dream on the Constitution has been fixed. It’s not so simple as you might think). Alas the times may be revolutionary but we are not. ‘No Bolsheviks’ here is the sign outside the House of Commons. We are all Mensheviks now Well we might start by winning the argument. When Ed Balls advanced the proposition that even the Labour objective of halving the deficit in four years might not be achievable without economic depression he was widely derided. What we have seen is that the  squeeze on expenditure started by Labour and intensified by the Coalition has already had a dramatic effect on the British economy. The Coalition tax increases and cuts have only just started. It is asking a lot of business and consumers to reverse that trend when personal incomes are squeezed and small and medium companies denied loan capital.

It may not be in Labour’s power to  change things for the better BUT the much derided and humiliated Lib Dems could do it if they had the will. It is difficult to determine how long the tragedy needs to unroll before they pluck up the courage to say with one (or almost one) voice that enough is enough. I hate to write this but history does help. Look at what happened to the Mensheviks and subsequently to a whole country and a substantial chunk of the European map? If you think that I exagerate you may change your mind as events unfold. I will not write, I told you so.

Leave a comment

Filed under BBC, Budget 2011, Cabinet, Cameron, Coalition Government, Commons, Deficit, Economics, Ed Balls, George Osborne, IFS, Nick Clegg, OBR, Politics, Vince Cable

Lib Dems: They Just Don’t Get It


There is now a Lib Dem mantra designed to show how Government has been materially improved becaus of its involvement in the Coalition. What we have, it might be supposed, is really a Lib Dem administration. The party can come up with a long list of its achievements. One by one Lib Dem policy dreams have been put into place. It is necessary  side for the purpose of this argument to recognise that there are   policies that those of us on the left can support: higher personal tax allowances, improvement of tax credits for the very poor. the triple lock on increases in the state pension, the Pupil Premium to help some disadvantaged poor children. Good on you, say I.

Do these policy changes make people less poor?  Yes, they do in a way. However, alas and alack, the imposition of VAT dwarfs these advantages and the poor will get poorer. I will not dwell on the LiB Dem opposition to any VAT increase in the General Election campaign except to comment the they were against it. We all remember the poster. They were against increases in tuition fees too and then suddenly they were not.

But what is the heart of the matter. Remember, the Lib Dems were against cuts in public expenditure on the scale propsed by the Tories. Now they are not. What they tell us now  is that these cuts are necessary and like Pilgrims Progress to the promised land they bring us all closer to full employment, rising living standards and sunshine. Trust us, you will see how wise we are it is said.

The Lib Dems no longer command trust. But are they right? Certainly the OBR has consistently produced economic forecasts that suggest they might be. We are days away now from a reckoning. The first quarter GDP figures for the for 2011 is soon to be announced. It may be that over the last six months the British economy may not have grown at all, or if it has it will be  at some miserable annualised rate. Unemployment may be rising not falling, inflation will continue to work its way up and not down and real incomes will be squeezed further. I do not know whether the OBR will be asked for a revised forecast but even if they are not asked, it is highly likely that some other respected forecasting institute will make a good fist of doing it.  And what will be observed? I anticipate it: a rising budget deficit and no chance of the Coalition’s economic objective of eliminating the deficit by 2015 being achieved.

Is this not the real charge against the Lib Dems? Not the cavilling  daily objections to their nonsense BUT one overriding error. On the essential and over-reaching issue of how to keep the economy growing and the public deficit falling THEY ARE PLAIN WRONG. The Lib Dems have sold their soul for a mess of potage to find it uneatable. The electorate will not forget it and a day of reckoning is close.

Leave a comment

Filed under BBC, Budget 2011, Cabinet, Coalition Government, Deficit, Economics, Ed Balls, Financial Times, George Osborne, IFS, Labour Blogs, Lib Dem blogs, Lib Dem Conference, Nick Clegg, OBR, Politics, Public Services, Rising prices, Spending Review, Treasury, University fees

The Economy: Spotting the Runes (Ruins)


One of the mysteries of our lives is the constant confidence of the OBR in economic recovery. There is, it is said, no need for a Plan B because the independent OBR tells us that the economy will recover. Each OBR forecast downgrades its predecessor but there is no denying the cheerful tone of its forecasts. In its recent forecast the OBR expresses the thought that the slide in output in the last quarter of 2010 was a dud figure and suggests that the decline was 0.2 percent and not 0.6 percent. On the back of this assumption the OBR confidently expects a bounce of 0.8 percent in the first quarter of 2011. The OBR gives a reassuring drop in inflation in 2012 to a rate of 2.5 percent.

We shall have to wait for the inflation figures but the output figures are available in some four weeks time, that is before the May local and assembley elections.  If the OBR is right, or nearly right, the Coalition can heave a sigh of relief but if they are wrong or mostly wrong they are up to their fetlocks in the mire.

One forecasting way out of such a dire consequence is the use of fan charts. These charts show a range of outcome. You can rely on it that the Government will finish some way between higher and lower points. It does this time. What a relief. But supposing , just supposing,  in April it is towards the bottom and not the top of the range. Is there then a Plan B? And what does the Daily Mail say then, poor thing? And what is the answer?

Leave a comment

Filed under Assembly Elections, BBC, Budget 2011, Cameron, Coalition Government, Conservative Home, Daily Mail, David Smith, Deficit, Economics, Ed Balls, George Osborne, Labour Blogs, Lib Dem blogs, Local elections, New Stateman, Nick Clegg, OBR, Politics, Scottish Assembly, Treasury

The Budget: A Tiptoe into Fantasy


A word about forecasting now that the OBR has had its third attempt to plot the economic progress of the British Economy. Like accountants before them the OBR is useful in recording the past but well-nigh useless in forecasting the future. We live in a time of  extreme economic turbulence and uncertainty when at any      time  wars, earthquakes, worldwide  pressure on resources and the stupidities of the human race can turn  nice judgements into inanities. Yet still we persist. It will be better in the future: the economy will grow, employment will rise, inflation will come down and real incomes will rise again. The OBR at least has the common sense to admit that all its forecasts are subject to great uncertainty. Well yes, they say, it may not turn out like this but we hope it will.

I commit myself to several judgements, First, the attempt to eliminate the budget deficit in a five year Parliament is doomed to failure. At  best the Coalition may complete the Parliament having achieved what Labour continues to promise: the deficit could be halved. We have in the Coalition a group of supply side fanatics who have always maintained that growth must come through a smaller state and greater productivity, who are antagonistic to public administration and welfare and suspicious of the state as pump priming anything. Come back Milton Friedman, all is forgiven. Economists have an adage that you can lead a horse to a trough but you cannot make it drink. The IFS has remarked that the numerous supply side intiatives announced in the Budget do not amount to a row of beans. They will add nothing to aggregate demand. What is needed is the pump priming of capital investment in rail, roads and building construction and a real (rather than imaginary) attempt to raise skill levels. Of course the Government is aware of these needs. It is doing something – but too little.

The central issue of George Osborne’s budget is a judgement of whether this Government at this time is right in believing that it is possible to eliminate the budget deficit in five years. If it is right in its belief it will go on to the glory dreamt of by our Dave and Nick. The objectives of financial probity and economic sucess will be achuieved and electoral success will be the reward. If it is imposible for Britain (and I suspect Greece, Ireland and Portugal) to do anything of the kind when will the game be up? I suggest the Budget of 2012 will be the time of reckoning. The Parliamentary rules now make it difficult to get rid of a Government – but not impossible. And at this time who might be leading the Labour Party. Might events work in favour of Ed Balls? The electorate love a winner. Watch this spot!

Leave a comment

Filed under BBC, Budget 2011, Cameron, CBI, Coalition Government, Deficit, Economics, Ed Balls, Ed Milliband, IFS, Labour Blogs, Labour Goverment, Labour leadership, Lib Dem blogs, Liberal Vision, Nick Clegg, OBR, Treasury